As it happened: RBA hands down another rate rise to nine-year high; Voters split on wage reform

Thank you for joining me on the blog this afternoon. I’m signing off until tomorrow afternoon (though the blog itself will return soon after 6am as usual).

For those just catching up now, some of the main headlines today were:

• The Reserve Bank lifted official interest rates by 25 basis points to 2.85 per cent, a nine-year high. Reserve Bank governor Philip Lowe said more were in store as inflation s expected to hit 8 per cent.
• NAB was the first lender to pass on the rise in full to home loan customers.

• Gold Trip won the 2022 Melbourne Cup, followed by Emissary and High Emocean. The event ran incident-free, despite one horse failing to finish.

• Crossbenchers are unhappy with the Albanese government’s industrial relations agenda, with independent MP Zali Steggall accusing them of trying to unionise more workforces.

A lot of commentary around rising interest rates looks at the impact on home loans.

That’s because two out of three Australians own their home, and more than half of home owners have a mortgage. (These figures are from the 2021 census.)

Of course, the Reserve Bank is not targeting mortgages in particular. That would only be part of its thinking.

I asked senior economics writer Matt Wade to give readers of the blog a quick economics lesson, explaining the relationship between inflation and interest rates.

Reserve Bank governor Philip Lowe said interest rates had been lifted to ‘establish a more sustainable balance of demand and supply in the Australian economy’.

He also underscored the bank’s determination to return inflation to between 2 and 3 per cent, and warned further interest rate increases might be needed to achieve this.

So, how will higher interest rates bring down inflation?

Higher interest rates will lift borrowing costs which, in turn, dampens spending across the economy.

Households respond by reining in their spending, while businesses respond by reducing how much they produce.

This leads to a decline in economic activity and employment.

When spending declines, demands falls and eventually so will price of everyday goods.

Turning briefly back to international news, here’s an update on the war in Ukraine.

Russian President Vladimir Putin said Russian strikes on Ukrainian infrastructure and a decision to freeze participation in a Black Sea grain export program were responses to a drone attack on Moscow’s fleet in Crimea that he blamed on Ukraine.

The latest assault on civilian infrastructure has left 80 per cent of Kyiv without running water, with residents of the capital forced to line up to collect water from ancient stone water wells and metal spigots.

The world desk has the full story.

With Reuters

In international news, more details have emerged suggesting the attack on Paul Pelosi, the husband of US House Speaker Nancy Pelosi, was politically motivated.

Authorities said the man accused of attacking Paul Pelosi told police he wanted to hold the Speaker hostage and “break her kneecaps” to show other members of Congress there were “consequences to actions”.

In a chilling federal complaint, officials say David DePape, 42, was carrying zip ties, tape and a rope in a backpack, when he broke into the couple’s San Francisco home early on Friday morning, went upstairs where 82-year-old Paul Pelosi was sleeping, and demanded to talk to “Nancy”.

“This house and the speaker herself were specifically targets,” San Francisco District Attorney Brooke Jenkins said at a Monday evening (Tuesday in Australia) news conference announcing state charges against DePape, including attempted murder.

“This was politically motivated,” Jenkins said. She implored the public to “watch the words that we say and to turn down the volume of our political rhetoric”.

There’s a full story here, courtesy of our world desk.

Back on federal politics and the national economy, shadow treasurer Angus Taylor has just given a press conference after the Reserve Bank pushed official interest rates to their highest level in nine years this afternoon.

You can watch it here: